Types of IT Outsourcing Models:
Which Model to Choose?

Source

Location-based outsourcing models

  • On-site outsourcing. This model implies inviting external service providers to your physical environment.
  • On-shore outsourcing. It means that you cooperate with your external team within the same state or country. The main advantage of this model is that there is a minimum of cultural or language barriers
  • Nearshore outsourcing. Within this model, a company hires third-party vendors that are located in neighboring countries and have the same time zone.
  • Offshore outsourcing. This type of outsourcing covers more distant locations. For example, a U.S. company hires an outsourcing team from Ukraine.

Relationship-based outsourcing

  • Staff augmentation. It can be similar to on-site outsourcing where a company temporarily rents additional resources. Within staff augmentation, a company also augments its resource capacity with external talents. It may happen either on-site or remotely.
  • Managed team model. In this model, both the internal organization’s team and external vendors take part in the same projects, while each party takes responsibility for a particular process.
  • Project-based model. This type of outsourcing entails the delegation of the entire project to a third-party service provider.

Outsourcing pricing models

  • Fixed-price model. It’s considered quite an old-fashioned approach to an outsourcing partnership. In this case, a third-party vendor sets a standard rate and charges monthly. To implement this model efficiently, the vendor should provide the host’s company with full details of the project scope/technical task.
  • Time and materials model. It is most widely spread among IT projects. Within this model, a client pays only for the time and resources spent on the project.
  • Incentive-based model. This model implies additional payments if the performance of the product significantly exceeds the initially outlined metrics.

Conclusion

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Jane Vyshnova

Jane Vyshnova

CEO & Founder at Dinarys GmbH | We help to grow 🚀e-commerce business & establish infrastructure 🔥